Since consignment stocks still form part of your valuated stock, you must manage this stock in your system.

However, consignment stock must be

• Managed separately from the rest of your stock so that you know exactly what stock is stored at the customer location
• Managed separately for each customer

In inventory management, the consignment stock is managed as special stock in your inventory and is assigned to specific customers. This enables you to keep track of returnable packaging stock by customer.

If the consignment stocks are not managed by the sold-to party but by a central office, you can use the partner function for special stock partner.

The special stock partner has been defined for carrying out consignment stock processing by means of a third party rather than the customer. This means you can manage all special stock under one partner. It makes sense to use the special stock partner if your customer is using decentralized order processing but manages consignment stock centrally.

If you want to process your consignment goods using a special stock partner, proceed as follows:

1. Create a customer master record for the special stock partner (account groups 0001 and DEBI are defined for this purpose in the standard system).
2. Enter the special stock partner in the relevant customer master record on the partner screen using the partner function SB.

When you create an order for this customer, the system automatically proposes the partner function SB in the document header and the document items. Consignment goods which have been entered in a consignment fill-up are always posted to the stock of the special stock partner when goods issue is carried out. You can also enter the partner function SB manually in the document header or in the relevant items if a special stock partner is required and is not proposed from the customer master record. If a special stock partner does not exist in the document header, inventory management is carried out using the sold-to party.

There are four main transactions for processing consignment stock in the R/3 System, all of which support separate management of stock:

Consignment fill up is used to supplement the customer’s consignment stock.

Goods issue of the appropriate stock is posted from the unrestricted-use stock to consignment stock (special stock). The goods remain in the possession of the vendor.

When you ship consignment stock to the customer, you record the transaction by creating a consignment fill-up order (order type KB). As a result, the system carries out the following actions:

• If special stock does not yet exist in your inventory for the customer (or special stock partner), the system creates it when goods issue is posted
• The relevant quantity is removed from regular inventory in your plant and is added to the special stock for the customer. The total valuated stock for the plant remains the same.
• The transaction is not relevant for pricing since the consignment stock remains the property of your company.

Consignment issue enables the customer to take consignment goods from the special stock for their use or to sell.

Consignment issue involves removing the goods from the special stock and making it the property of the customer.

When the customer removes consignment stock to use or sell, you record the transaction in the system by creating a consignment issue order (order type KE). As a result, the system carries out the following actions:

• When goods issue is posted, the relevant quantity is deducted from both the customer’s special stock and your own total valuated stock.
• The transaction is relevant for pricing since the goods now become the property of the customer.

Any consignment goods stored at the customer’s warehouse that haven’t been used can be reposted to your company’s warehouse with a consignment pick-up.

If the customer returns consignment stock to you, you record the transaction in the system by creating a consignment pick-up order (order type KA). As a result, the system carries out the following actions:

• When goods issue is posted, the relevant quantity is deducted from the customer’s special stock and is added back into your regular stock at the plant where the goods are returned. Your total valuated stock remains the same since the returned stock was regarded as part of your own inventory even while it was at the customer’s premises.
• This transaction is not relevant for billing.

Consignment returns are used for when your customer wants to return goods to the consignment stock.

If the customer wishes to claim on consignment goods which have already been issued, you can record this transaction by creating a consignment return order (order type KR). As a result, the system carries out the following actions:

• When goods issue is posted, the relevant quantity is added to the customer’s special stock at the plant where the goods are returned
• Since the ownership of the goods is passed from the customer back to your company, the transaction is relevant for billing. In this case, the customer receives a credit memo for the returned goods.

Depending on the settings in Customizing for Sales, you can create consignment returns with direct reference to a consignment issue. The consignment issue appears in the document flow for the consignment return. This function is not supported in the standard version of the SAP R/3 System.

The following table provides an overview of the order types used in the standard system for processing consignments:

Whether pricing is carried out for the individual transactions depends on the item category. The schedule line category controls the availability check and the transfer of requirements in each of the transactions. The schedule line category itself is determined by the item category and the MRP type of the material. The order types KE and KA check against the consignment stock for the customer involved and order type KB checks against your own plant stock. Requirement records for consignment stock are stored as individual requirements, independently of the setting in the material master record.